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Practice Guide to Auditing Efficiency

Why Audit Efficiency?

Auditing efficiency is important for internal and external public sector auditors. Indeed, auditing the efficiency of public sector operations and programs is arguably more important today than it has ever been.

Efficiency has received more attention in recent times because of a challenging economic context, evolving public perceptions, and new trends in public administration:

  • Economic context — Most Canadian governments have been struggling with deficits and rising program costs. For example, in some provinces, health care expenditures are approaching 50 percent of total departmental expenses and are expected to continue to soar in response to the increasing needs of an aging population.
  • Public perceptions — Faced with declining service levels and rising user fees, the general public is calling for governments to remove waste in the system and to improve the delivery, efficiency, and quality of public services through increased use of technology, innovation, partnerships, and new delivery models.
  • Public administration trends — Public administration concepts are evolving and the public sector is demonstrating more willingness to experiment with new models and methods to achieve sustainable cost savings. Increasingly, frameworks applied in the private sector to achieve efficiency are being adopted by the public sector.

In attempts to reduce their deficits and improve service delivery, governments in Canada and abroad have sought to increase efficiency in a number of sectors. Opportunities to achieve “quick wins” or to target “low-hanging fruits” have been exploited, but sustainable, long-term cost savings have been more elusive.

The former Auditor General of Ontario, Jim McCarter, has stressed the importance of auditing efficiency:

“This Report comes at a time when the industrialized world is struggling with the twin challenges of an economic slowdown and high debt, issues that also confront Ontario. So in a number of this year’s value-for-money audits, we paid particular attention to areas where efficiencies and cost savings in government operations may be possible.”
Source: News release accompanying the 2012 Report of the Auditor General of Ontario, December 12, 2012.

In the current environment, audits of efficiency could—and should—make a significant contribution to efficient government at all levels.

Specifically, by conducting performance audits of efficiency, auditors can:

  • Provide objective and independent information to parliamentarians and public sector decision makers on the efficiency of key public programs and services;
  • Issue recommendations that will help public organizations improve the efficiency of their programs and services and the quality of services delivered to the public;
  • Establish good practice expectations for the broader public service;
  • Help facilitate management accountability for improving productivity and hold management responsible for stewardship responsibilities; and
  • Make significant contributions that will broaden the continuing debates on the efficiency of the public sector.